For reasons better espoused by others, I've never been a big fan of Wal-Mart Stores Inc. In fact, on those rare occasions when I must shop at one of its stores (that is, when in a rural area where Wal-Mart is the only game in town), I try my best to only purchase loss leaders. (You know what I mean: those unbelievably priced deals that are intended to nudge folks toward pricier items.)

Yet, I have to say, Wal-Mart is doing a bang-up job these days of helping to move unbanked and financially underserved Americans into the financial mainstream.

In the past few months, the retailing giant has announced a sophisticated electronic bill-pay service at its in-store MoneyCenters and a plan to convert tens of thousands of employees now receiving pay checks to electronic payroll systems.

In a press statement last month, Wal-Mart said "associates" must now choose to receive their pay either by direct deposit or on a payroll card. To put this in perspective, consider that the retailing giant's total workforce (workers at both Wal-Mart and Sam's Club stores) exceeds 2.1 million, worldwide.

Sure, I know, direct deposit saves employers money, so why shouldn't Wal-Mart want to pay all its workers that way? But direct deposit is far from universal, and I don't know of any large organizations (save, perhaps, government agencies) with bragging rights to 100 percent employee participation.

I also know Wal-Mart has been making a play to become a bank, and that this is likely part of a grander plan to make that happen. Personally (and professionally) I don't like the notion of a retailer being a bank. But Wal-Mart's efforts to reach consumers who have little or no interaction with financial institutions (the unbanked and underbanked) have given me pause.

After all, this is a company (and wannabe bank) that is bringing sophisticated financial services to folks who either have been ignored or dropped by federally chartered financial institutions.

Banks ignore unbanked at their peril

There's a huge market opportunity in reaching out to the 50 million-plus American households that are now unbanked or underbanked. It's a market that banks have shown little interest in pursuing, according to a report earlier this year by the Federal Deposit Insurance Corp. And that, I suppose, makes this market fair game for a company like Wal-Mart.

The retailer's new electronic payroll program was developed with help from MasterCard Worldwide and First Data Corp. The largest processor of MasterCard- and Visa Inc.-branded payment cards in the United States, First Data is the technology company behind Wal-Mart's POS payments system.

Wal-Mart employees who don't have bank accounts and those who prefer to not receive direct deposit into an existing bank account can opt instead to have their pay deposited to a MasterCard PayCard (a prepaid debit card) and accessible through First Data's Money Network, a payroll card processing and reload service First Data offers its retailing clients.

Employees can also have checks connected to their payroll cards for things like bill pay. According to First Data, funds deposited through its Money Network on the PayCard are FDIC insured.

"Electronic payroll is the right choice for our associates, our company and the environment," said Tom Schoewe, Executive Vice President and Chief Financial Officer for Wal-Mart. "It provides our associates with fast, convenient and safe access to their pay."

"Wal-Mart art is raising the bar for employers everywhere by providing associates who don't have bank accounts with immediate access to funds on payday, without fee or discount, and access to cash at thousands of locations across the country," said Ed Labry, Chief of First Data's Retail and Alliance Services.

Indeed, the program shows how well positioned employers are to help America's working poor transition to the financial mainstream.

Patti Murphy is Senior Editor of The Green Sheet and President of The Takoma Group. E-mail her at patti@greensheet.com.

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